April 2025 US CPI: Further Cooling Won’t Force Fed’s Hand

Forex

Economic

Summary:

Headline CPI rose 2.3% YoY last month, cooler than consensus expectations for an unchanged 2.4% YoY, while core prices rose by 2.8% on an annual basis. So-called ‘supercore' prices, meanwhile, aka core services inflation less housing, rose 2.7% YoY in April, a fresh low since early-2021, and a notable decline from the prior 2.9% annual rate.

April 2025 US CPI: Further Cooling Won’t Force Fed’s Hand_1

On an MoM basis, meanwhile, price pressures firmed compared to the previous couple of months, largely a result of tariffs beginning to boost prices across the economy, the impacts of which will continue to show up over the next quarter or two, even though the most drastic trade levies have been dramatically pared back since ‘Liberation Day'. Headline CPI rose 0.2% MoM in April, cooler than expected but still the firmest print since January, while prices excluding food and energy also rose 0.2% MoM over the same period.

Annualising this monthly data helps to provide a better idea of the inflationary backdrop, and underlying price trends:

3-month annualised CPI: 1.6% (prior 2.6%)
6-month annualised CPI: 3.0 % (prior 3.0%)
3-month annualised core CPI: 2.1 % (prior 3.0%)
6-month annualised core CPI: 3.0 % (prior 3.0%)

Digging a little deeper into the data, the April CPI report pointed to a continuation of recent trends, with goods price pressures continuing to firm, as core goods deflation came to an end for the first time since the start of 2024, even as core services prices continued to ebb.

April 2025 US CPI: Further Cooling Won’t Force Fed’s Hand_2

In the aftermath of the data, money markets underwent a modest dovish repricing, though little moves of any significance, with the USD OIS curve continuing to discount two 25bp Fed cuts by year-end, in September and December.

April 2025 US CPI: Further Cooling Won’t Force Fed’s Hand_3

On the whole, the April inflation figures won't be a game-changer, or anything of the sort, for the FOMC and the near-term policy outlook. Powell & Co. remain firmly in ‘wait and see' mode for the time being, seeking to sit on the sidelines amid a ‘well positioned' policy stance, assessing both incoming economic data, as well as changes in trade policy, and digesting how these shifts may alter the balance of risks facing each side of the dual mandate.

Primarily, though, the Committee's focus remains on ensuring that inflation expectations remain well-anchored as, even in light of the recent reduction in US tariffs on Chinese goods, the substantial rise in the overall average effective tariff rate is near-certain to result in CPI continuing to head higher through the summer.

With these upside inflation risks in mind, as well as the considerable degree of uncertainty that continues to cloud the economic outlook, and the labour market remaining in rude health, the bar to Fed action in the short-term remains a very high one indeed. While the direction of travel for rates remains lower, any cuts before the end of the third quarter seem a very long shot indeed, barring a significant deterioration in labour market conditions and policymakers obtaining sufficient confidence in price pressures remaining contained in the meantime.

Source: Pepperstone

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Warren Takunda

Economic

Faith in a European macroeconomic decoupling has strengthened, with a net 31% of respondents anticipating accelerated growth in the region, driven primarily by hopes for fiscal support in Germany.

With expectations for European economic growth strengthening and relative optimism about inflation, international investors may find European equities increasingly attractive, especially given the contrast with underweight positioning in U.S. equities.

This suggests a tactical opportunity to rotate into European stocks and the potential for relative outperformance of European markets if growth surprises to the upside.

Such developments advocate for international capital flow dynamics that would bid up the Euro.

"We remain optimistic on the Euro," says Nick Kennedy, FX Strategist at Lloyds Bank. "Europe's big step forward - which carved out fiscal space (for higher defence spending), alongside an even more powerful German fiscal programme (worth approximately €100BN per annum over the next decade) - provides a constructive and timely push."

Donald Trump's tariffs and domestic policies have dented the U.S. exceptionalism trade, which has weighed on the Dollar in 2025. The Euro has been a major beneficiary, and this can continue if investors continue to see value in Europe, as per Bank of America's survey.

The share of respondents expecting the global economy to slow over the next 12 months fell to 59% in May, down from 82% a month earlier. Expectations for a global recession collapsed from a two-year high of 42% to near zero, while 61% now see a soft landing as the most likely outcome, reversing last month’s majority view for a hard landing.

The survey, conducted between May 2 and 8, came ahead of a new U.S.-China trade agreement, suggesting further room for optimism in future growth expectations.

European inflation expectations remained mixed. While 28% of investors expect inflation in the region to fall over the next year, a net 30% expect global inflation to rise.

Above: "78% of European investors expect US growth to slow over the coming months, down from 89% last month, while 16% expect growth to flatline, up from 7% last month" - Bank of America.

Bullish Sentiment Boosts EU Equities

Investor sentiment toward European equities has turned increasingly positive. Some 59% of respondents now see upside potential for the region’s stock markets, up from 51% in April. None of the investors surveyed forecast significant downside, compared with 11% the previous month.

A net 35% of respondents reported overweight positions in European equities, close to recent highs, while a net 38% said they were underweight U.S. equities—a two-year peak.

The biggest perceived risk to portfolio positioning is reducing equity exposure too aggressively, cited by 28% of participants.

Banks Lead Sector Preferences

As macroeconomic concerns recede, financials have regained favor among investors. A plurality of 22% identified the sector as the likely top performer this year, followed by industrials at 19%. Banks are now the top consensus overweight, at 28%, with insurance (25%) and utilities (19%) also prominent. Autos, chemicals, and basic resources were the most underweighted sectors.

Geographically, Germany remains the most favored market, ahead of the UK, while Switzerland is the largest underweight by a wide margin.

Meanwhile, 56% of respondents expect high-quality stocks to outperform lower-quality names over the next year—the highest reading in nine months.

Source: Poundsterlinglive

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Glendon

Economic

Forex

The British pound has edged higher on Tuesday. In the European session, GBP/USD is trading at 1.3218, up 0.34% on the day.

UK employment, wages cool

Uncertainty over the global economy, particularly US tariff policy, weighed on the UK employment report. The economy added 112 thousand jobs in the three months ending in March, down sharply from 206 thousand a month earlier and shy of the market estimate of 120 thousand. It was the weakest job growth in three months.

The unemployment rate inched up to 4.5% from 4.4%, in line with expectations and its highest level since August 2021. Wage growth including bonuses eased to 5.5% from a revised 5.7%, above the market estimate of 5.2%.

The Bank of England cut rates by a quarter-point to 4.25% last week but remains in a bind. The cooling job market should push inflation lower but wage growth remains stubbornly high and is an upside risk to inflation. The BoE will have to carve out a rate path that balances a weaker labor market with high wage growth – this could mean a delay in further rate cuts until late in the year. The BoE meets next on June 19.

US CPI expected to rise in April

The US releases the April inflation report later today. Headline CPI is expected to rise to 0.3% m/m, up from -0.1% in March, which marked the first decline since June 2024. Annually, headline CPI is expected to remain unchanged at 2.4%. Core CPI is also expected to climb to 0.3% from 0.1%. Annually, core CPI is projected to remain at 2.8%.

The escalating trade tensions due to US tariffs have raised concerns that US growth will fall and inflation will decline, even resulting in a recession in the US. The US-China agreement to slash tariffs, which will be in effect for 90 days, is an important de-escalation in the trade war and should curtail inflation and reduce the risk of a recession.

GBP/USD Technical

GBP/USD is testing resistance at 1.3205. Above, there is resistance at 1.3271
1.3112 and 1.3046 are the next support levels

GBPUSD 1-Day Chart, May 13, 2025

Source: ACTIONFOREX

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Gerik

Economic

J&T’s Price War Strategy Pressures Southeast Asia’s Logistics Industry

Southeast Asia’s logistics sector is entering turbulent waters as J&T Express, the region’s market leader, continues to expand its dominance through deep price cuts. According to its 2024 financial report, J&T retained the top spot for the fifth consecutive year, growing its market share from 25.4% in 2023 to 28.6%. This gain is particularly notable given the rapid rise of SPX Express, Shopee’s in-house logistics arm.

However, J&T’s victory is stirring anxiety across the industry. Experts warn that its "price-to-win" model is pushing competitors into a downward spiral. This aggressive cost-cutting threatens to collapse smaller players who lack the financial cushion to absorb sustained losses.

“This is a race to the bottom. Survival now depends on who can slash prices the most,” said Lai Chang Wen, CEO and co-founder of Ninja Van, in an interview with Tech in Asia. He argued that such short-term profit maximization comes at the expense of long-term investment in technology and innovation—foundational elements of a resilient logistics ecosystem.

Regulatory Backlash Brewing in Indonesia

Indonesia, one of J&T’s most critical markets, is already showing signs of market strain. The country’s Digital Economy Logistics Association (ALDEI) has raised alarms about widespread below-cost pricing practices that are destabilizing the logistics landscape.

“We’re seeing a surge in below-cost selling that is collapsing smaller logistics firms,” warned Jimmi Krismiardhi, Vice Chairman of ALDEI. In response, the Indonesian government is seriously considering implementing a pricing floor to prevent what it calls “destructive competition.” ALDEI confirms that the proposal has received support from both industry associations and government officials.

Sustainability of J&T’s Strategy in Question

Industry insiders note that J&T has managed to keep prices low even amid rising fuel costs, while many third-party logistics (3PL) companies have been forced to adjust rates to protect profit margins. According to a logistics executive in Indonesia who spoke anonymously, this pricing strategy is “unsustainable for most players.”

In defense of J&T’s approach, CFO Dylan Tey emphasized the role of economies of scale. By handling massive parcel volumes, J&T significantly reduces per-unit costs, enabling the company to maintain low prices without resorting to loss-leading.

Implications for the Future

While J&T’s scale may provide temporary resilience, its strategy risks triggering a broader industry crisis if smaller firms are driven out, reducing competition and weakening service quality. Indonesia’s proposed price floor may serve as a test case for regional regulators grappling with how to maintain a healthy, competitive logistics market in the face of price wars.

The core dilemma now facing Southeast Asia’s logistics sector is whether growth at any cost is worth the long-term price—and how regulators and firms alike will respond before the floor truly falls out from beneath the industry.

Source:

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Blue River

Economic

Forex

Technical Analysis

EUR/USD dropped to 1.1110 on Tuesday, with the US dollar surging by over 1% in the previous trading session. The rally was driven by market reactions to news of a provisional agreement between China and the US to reduce tariffs, which helped alleviate global recession fears.

Key factors driving EUR/USD movement

Washington and Beijing have agreed to cut tariffs to 30% and 10%, respectively, for 90 days.

Meanwhile, US Treasury Secretary Scott Bessent confirmed plans to meet with Chinese representatives again in the coming weeks to begin negotiations on a broader trade deal.

The tariff reductions boosted market sentiment towards the dollar, which had previously faced pressure over concerns that President Donald Trump’s trade policies were diminishing the appeal of US assets. However, market nervousness is likely to persist until the White House establishes stable trade terms with all key partners.

Attention now turns to the latest US inflation report, which may show how the new tariff policy affects prices.

Technical analysis: EUR/USD

On the H4 chart, EUR/USD broke below 1.1190, completing the third wave of decline towards 1.1065. Today, we anticipate a corrective wave retesting 1.1190 (from below). Once this correction concludes, a new downward wave towards 1.1040 is expected. This scenario is technically confirmed by the MACD indicator, with its signal line below zero and pointing decisively downward.

On the H1 chart, the market has achieved the local downside target at 1.1065. Today, a potential rebound to 1.1126 is in focus. If this level is breached upwards, a further correction towards 1.1190 may follow. Subsequently, the downward trend could resume, targeting 1.1040. This outlook is supported by the Stochastic oscillator, whose signal line is above 80 but poised to decline towards 20.

Conclusion

The US dollar’s resurgence reflects improved risk sentiment following the US-China tariff truce, though uncertainty lingers over long-term trade relations. Technically, EUR/USD remains under pressure, with further downside likely after a brief correction.

Source: ACTIONFOREX

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Warren Takunda

Economic

China–U.S. Trade War

Inflation may have picked up slightly last month as President Donald Trump’s widespread tariffs kicked in, a trend economists expect will become more visible in the coming months.

Consumer prices are forecast to have risen 2.4% in April compared with a year earlier, according to data provider FactSet, the same as in March and down from 3% at the start of the year. Still, on a monthly basis, economists expect that the consumer price index rose 0.3% from March to April, a pace that would worsen inflation if it continued, after it fell for the first time in nearly five years the previous month.

Tuesday’s report could provide an early read on how Trump’s duties will affect the prices Americans pay for necessities and other goods such as clothing, shoes, furniture and even groceries. Duties on many goods from Mexico and Canada took effect in February and could have impacted prices last month. Still, economists forecast the impact from duties to be modest.

“Firms have indicated ... that they are unsure how much of the tariff cost increase they can pass through to consumers without denting demand, and we expect some testing of the waters and a staggered pattern of price increases,” Laura Rosner-Warburton, cofounder of Macro Policy Perspectives, wrote in note to clients.

The Trump administration said early Monday that it had reached a deal with China to sharply reduce its tariffs on imports from that country. But even taking that agreement into account, U.S. average import taxes remain at 90-year highs, economists said, which could worsen inflation in the coming months.

Tariffs on furniture, agricultural goods from Mexico, and on clothes and shoes may have boosted prices last month. Auto prices may have risen because car sales surged as Americans sought to get ahead of duties on new cars and car parts, reducing the need for dealers to offer discounts.

Excluding the volatile food and energy categories, core prices are forecast to have risen 2.8% last month compared to a year earlier, the same as in March. On a monthly basis, they are expected to rise 0.3%, up from just 0.1% the previous month.

It will likely take more time for the full impact of the duties to be reflected in prices across U.S. businesses, economists say. Items that were already in transit when the tariffs were imposed won’t have to pay the duties, while many companies have built a stockpile of goods and could hold off on price hikes in hopes that tariffs will ultimately be reduced.

Consumers, at least those outside the top one-fifth in incomes, are also more stretched financially than a few years ago and are more likely to resist price hikes, which could push firms to delay raising prices as long as possible.

Consumer prices cooled noticeably in February and March, prompting Trump to claim repeatedly on social media that there is “NO INFLATION.” Inflation has fallen to nearly the 2% target set by the Federal Reserve, the agency charged with fighting higher prices.

Yet grocery prices have jumped in two out of the past three months, despite Trump’s claims. He has also said gas has fallen to $1.98 a gallon, which is below the measured average in any state. AAA said Monday that gas costs an average $3.14 a gallon nationwide.

On Monday, the White House said it has cut the tariff it imposed on Chinese goods from 145% to 30%, while China also sharply reduced its duties on U.S. goods. Both sides could add 24% tariffs after 90 days if they don’t reach a broader agreement.

The smaller import taxes will limit the damage to the U.S. economy, but combined with a 10% universal tariff already in place, plus larger import taxes on autos, steel, and aluminum, economists forecast they will still slow growth this year and worsen inflation.

The Yale Budget Lab, for example, estimates that the average U.S. tariff will be nearly 18% even including the deal reached Monday between the U.S. and China. At that level, U.S. duties will be the highest since 1934. The Budget Lab calculates the tariffs will lift prices 1.7% and cost the average household about $2,800.

And while Trump may tout his trade deals — such as the one with the United Kingdom reached last week — he has also said “tariffs is the most beautiful word” in the dictionary, and is counting on revenue from duties to narrow the budget deficit, suggesting tariffs will likely remain high.

The tariffs have also put the Federal Reserve in an exceedingly difficult spot, as Chair Jerome Powell acknowledged in a news conference last week. Powell said the duties have raised the risk of both higher inflation and higher unemployment, two challenges that rarely occur simultaneously. If unemployment rose, the Fed would typically cut rates to boost the economy, while if inflation worsened, the central bank would usually raise rates or leave them elevated.

Source: AP

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Glendon

Economic

Commodity

It’s been almost three years since former US President Joe Biden journeyed to Saudi Arabia pleading for more oil, only to return empty-handed.

His successor, Donald Trump, is having more luck — even before he started this week’s Middle East tour.

Riyadh has led two supersized production increases from the OPEC+ cartel in recent weeks in apparent deference to the president’s calls for cheaper crude. Prices have crashed to a four-year low.

The fate of that strategy could become clearer when Trump meets the kingdom’s rulers today.

At $65 per barrel, oil prices remain significantly below the levels the Saudis need, according to the International Monetary Fund. The nation’s budget deficit has soared.

That poses a particular challenge for the $600 billion in investments Crown Prince Mohammed bin Salman has promised the US as well as the big-ticket deals that top the American president’s agenda.

What the prince will tell Trump remains unknown, but if ever there was a moment to explain that the drive for lower oil prices has unintended consequences, this is it.

On June 1, the Organization of the Petroleum Exporting Countries and its partners will consider another output increase.

Officials maintain that the alliance’s supply push is aimed at punishing cheating members and not meant as a concession to Washington. Nonetheless, it’s impossible to ignore the geopolitical backdrop.

If Trump’s visit yields any indications that Riyadh has latitude to tighten supplies, crude futures could rally. But if it appears the president is piling on pressure for more barrels, the market could sink back toward $60 a barrel.

Of course, OPEC+ strategy isn’t the only oil-related element of Trump’s trip, which includes stops in the United Arab Emirates and Qatar.

Trump is laboring on a nuclear pact with Iran, which could eventually relieve sanctions on the Islamic Republic’s oil exports. A ceasefire with its Yemeni proxies, the Houthis, hints at progress.

While the Gulf states once pushed a hawkish stance on Tehran, recently they’ve grown more pragmatic, steering Washington away from the military measures advocated by Israel.

If negotiations gather momentum, Iran could add to the tide of Middle East barrels: a win for Trump but another blow for prices.

--Grant Smith, Bloomberg News

A drop in naphtha sales has weighed on Russia’s refined-fuel exports so far this month. Seaborne shipments of petroleum products totaled 2.07 million barrels a day through May 10, according to data compiled by Bloomberg from analytics firm Vortexa Ltd. That’s 7% lower than April’s daily average. Market participants look to these numbers as a gauge of Russian oil production in the absence of official information.

Trump arrived in Riyadh today with a contingent of business leaders as he tries to secure $1 trillion in investment from the Saudis. Follow our live blog on his visit.

Phillips 66 shareholders should vote for all four board candidates nominated by activist investor Elliott Investment Management in its upcoming annual meeting, proxy advisory firm Institutional Shareholder Services Inc. said.

Chinese rare-earth exporters are asking the government to clarify whether they’re allowed to sell to the US now that Beijing and Washington have called a ceasefire in their trade war.

Clean-tech companies eligible for federal support under Biden’s policies are considering leaving the US as the Trump administration pulls the plug on financing, says the former head of the program that vetted the firms.

US shale oil output has probably peaked, just don’t expect a rapid decline like the downturns of 2015 and 2020, Bloomberg Opinion’s Javier Blas writes.

Ten US cargoes of liquefied natural gas plied key routes from May 5 to 11, three more than a week earlier and the most since November, according to BloombergNEF. Two tankers traversed the Suez Canal for deliveries to Egypt. One carrier crossed the Panama Canal, and the rest sailed around the Cape of Good Hope. Global LNG imports recovered 2% week-on-week to almost 7.5 million metric tons.